Corporate reform is underway albeit slowly, and there remains potential for further monetary stimulus measures to be enacted.
As Nick Peters, portfolio manager at Fidelity Solutions points out, valutations are attractive on relative basis compared to other developed markets. “At 13.99, the Y+1 estimate P/E ratio is lower than that of the UK or the US,” he said. “Even if economic growth does disappoint, then Japanese equities stand to benefit from bottom-up drivers of growth. These include a friendlier shareholder culture, increased dividend payout ratios and increased equity allocation among government pension funds.”
Japan is not without its own headwinds however, particularly its demographics.
The dark side of the wider argument is looking at least as strong as the optimistic one however. As very well laid out in this piece on macro concerns based on views from GAM, there is plenty to suggest battening down the hatches could be the way to go for wealth managers.
From the increasing chance of ‘Brexit’ to the upcoming American presidential race via China’s increasing geopolitical ambitions, there is plenty on the macro side to concern investors.
Whether 2016 will be a triumph or disaster for most investors will only becoming clear in time, but the likeliest scenario is that it will be somewhere between these two extremes when all is said and done.
